Amazon antitrust complaint from US FTC enters critical stage

Amazon antitrust complaint from US FTC enters critical stage

Amazon has been summoned to the US Federal Trade Commission this week for a "last rites" meeting where the company will face the individual commissioners to discuss a major antitrust complaint against the company that, if filed, will mark one of the most significant recent cases brought by enforcers. While the case is clearly taking shape, the form and direction it ultimately takes will depend on some crucial decisions at the FTC over the coming weeks.

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14 August 2023
Michael Acton, MLex Senior Correspondent

Amazon has been summoned to the US Federal Trade Commission this week for a "last rites" meeting where the company will face the individual commissioners to discuss a major antitrust complaint against the company that, if filed, will mark one of the most significant recent cases brought by enforcers in years.

While the case is clearly taking shape, the form and direction it ultimately takes will depend on some crucial decisions at the FTC over the coming weeks.

It’s not certain that the agency will sue the tech giant, but after years of investigation, the appointment of Amazon arch-critic Lina Khan at the head of the agency, and highly publicized congressional hearings and reports slamming the company over its alleged abuses of its market power, the safer bet is that a complaint is coming.

It’s understood that the agency has been looking at a broad range of conduct, but that the case could come down to questions about its bundling of Amazon Prime products, its logistics business – Fulfilment By Amazon – and the "Buy Box" which appears when consumers click on a specific product.

The regulator may seek a breakup of the company, something it has attempted already in its antitrust case against Meta.

The "last rites" meetings this week mean FTC staff have already submitted memoranda on whether a case should be brought. Two separate memoranda will have been produced by the Bureau of Competition and the Bureau of Economics. The Office of the General Counsel also has an opportunity to weigh in on the merits of the case, and may submit its own opinion.

Where you stand depends on where you sit, and it isn’t unheard of for the different offices within the FTC to take different stances on a case.

More steps

"Last rites" meetings before a final decision on whether to bring a case aren't a statutory requirement for the agency, and it may be a misnomer, since it implies that the decision to sue is a foregone conclusion. In fact, it’s still possible for the FTC leadership to change direction.

Assuming it pushes ahead with a complaint, for the FTC leadership the meetings could offer an opportunity to preview the arguments that Amazon is likely to make in court. And for Amazon, it represents a last chance to persuade the commissioners not to sue them.

Once the "last rites" meetings with the three sitting commissioners are over, there are still internal steps to be taken before any complaint lands in court. These additional internal steps at the FTC mean it’s unlikely that the complaint will land this month, with September looking more likely.

First, the commissioners will meet with top staff from the three bureaus. Then a date will be set for a formal vote by the commissioners.

The final shape of the complaint, and what allegations it ultimately contains, remains subject to change right up until the moment the final vote is held.

One possible curveball in this process is the question of whether the FTC is trying to bring state attorneys general onboard. While it may give the agency more resources and "moral" authority if it files a case, such coordination with states undoubtedly slows the process of filing a complaint.

Administrative proceeding

The FTC has to decide not only what to file, but where to file. There are a few candidates.

The agency can file in its own in-house administrative court. This brings both advantages and disadvantages.

On the one hand, the administrative court means the agency technically gets to write the final decision in the case, as the in-house judge’s decision – assuming Amazon loses – is initially appealed to commissioners. After that, the case would go on to a federal appeals court.

Yet there’s a sting in the tail. Assuming Amazon lost the case at the FTC, the company would have the option of which federal circuit court to appeal to, giving it a strategic advantage insofar as it can select the venue it thinks has the most favorable case law.

There’s another strategic consideration for the FTC when it comes to the administrative court. The Supreme Court’s rulings in Axon v. FTC and West Virginia v. Environmental Protection Agency have shone a light on the top court’s willingness to entertain questions about the constitutionality of in-house regulatory courts.

Amazon has already clashed with the regulator over whether Chair Khan should recuse herself from the case given her prior criticisms of the company. An administrative court case might risk adding fuel to the fire when it comes to questions about due process.

The FTC’s last Big Tech case involving alleged anticompetitive conduct was against Meta in 2020, and was filed in DC federal court, where the agency at least can't be accused of picking a venue perceived by critics as inherently unfair to defendants.

Federal courts

For the FTC, an advantage of picking a federal court over an administrative court is that it allows the commissioners to maintain their oversight of a case. In-house cases, once set in motion, create a firewall between the leadership and the FTC’s legal team, walling the commissioners off from providing strategic direction.

Federal courts bring their own set of concerns, however. As shown by the ongoing tussle between Google and a group of states over whether their adtech case should be fought in Texas or New York, enforcers can expect a jurisdictional fight if they leave any doubt about whether they've chosen the proper venue.

To avoid these sorts of delays, and if the administrative court is ruled out, the field narrows to three likely candidates: the Western District of Washington in Seattle, where Amazon is based; the District of Columbia in the FTC’s backyard; or the Eastern District of Virginia, known as a "rocket docket" where cases move more quickly than is typical, and where Amazon also has a strong presence.

When contemplating where to file, the agency may consider local circuit court case law and how it helps or hinders its case. In DC, one pertinent circuit court case regarding a Section 2 monopolization case is the DOJ’s lawsuit against Microsoft, overturned by the DC Circuit Court in 2001.

In the Ninth Circuit, which covers Seattle, the case law might provide an avenue for Amazon to argue that some of its activities, for example around the bundling of its Prime services, amounted to product improvements and are therefore shielded from antitrust scrutiny – as set out in the 2010 ruling in Allied Orthopedic Appliances Inc. v. Tyco Health Care Group LP.

Section 5

Recent cases and policy statements from the FTC suggest the agency is keen to test the limits of the law. In its ultimately unsuccessful bid to block Meta’s acquisition of Within, it revived a rarely used theory of a threat to "potential competition" to argue that Meta was seeking to buy a company that was not yet, but might one day, be a horizontal competitor.

Since Khan took over as head of the agency, it has been reviving Section 5 of the FTC Act, which addresses "unfair methods of competition." This would involve conduct that isn't clearly a violation of Section 1 or 2 of the Sherman Act, but is nonetheless deemed anticompetitive.

One of Khan’s first acts in her new job was to repeal a 2015 policy statement on Section 5 that placed a series of restrictions on where and when Section 5 would be used. Then last November, the FTC adopted a new policy statement asserting that the FTC will police the boundary between fair and unfair competition as originally intended under the statute, which dates to 1914. Khan has said the agency intends to use it as a central tool in enforcement.

Since then, the agency hasn't filed a major antitrust case citing violations of Section 5. In the past, Section 5 cases have not fared well in court. In the 1984 Second Circuit case in E.i. Du Pont De Nemours v. Federal Trade Commission, for example, the appeals court judges left the question of the scope of Section 5 open.

There, the appeals court judges found that “even if the Commission has authority under Sec. 5 to forbid legitimate, non-collusive business practices which substantially lessen competition, there has not been a sufficient showing of lessening of competition in the instant case to permit the exercise of that power.”

Still, the agency must have considered whether this is the time and the place to bring the statute to bear. If the FTC thinks some aspects of Amazon’s conduct don't fall squarely under Section 1 and Section 2 of the Sherman Act, don’t rule out the prospect of the enforcer bringing back an old friend.

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